Retail Sales and Real Retail Sales ex Gasoline
This report is excerpted from the permanent chart page for Retail Sales and Consumer Sentiment indicators, updated June 13, 2012
Real retail sales, ex gasoline prices, and adjusted for inflation have been increasing at an annual rate of between 0 and 7.5% since 2010. The year to year gain in May was 4.6%, which is in line with the average growth since 2010. The monthly gain of 6.8% was far better than May of last year, and a better than average gain for May.
When analyzing retail sales, I’m interested in the actual volume of sales, not the inflation skewed dollar total. To get to the kernel of the matter, I look at the real, not seasonally finagled retail sales, adjusted for top line CPI inflation (not core which normally understates the actual). Then I back out gasoline sales, which are a substantial portion of total retail sales. Gasoline sales distort total retail sales higher when gas prices are rising, when they actually act like a tax on disposable income and reduce non-gasoline sales. On the other hand, when gas prices fall, the top line total retail sales figure will understate any gains in the volume of sales. To get the real picture of the strength of the consumer sector or lack thereof, we must subtract gasoline sales, which typically account for around 12% of total retail sales. Therefore the number that I track is real, inflation adjusted sales, ex gasoline and not seasonally adjusted. This represents the actual volume of retail sales.
May is always an up month for retail sales. When looking at the actual, not seasonally finagled data, it’s necessary to look at the current month relative to the same month in prior years to get an idea of how the current month did in relation to the trend. Nominal retail sales including inflation and gasoline sales in May rose 6.4% month to month. This compares with just 3% in May of 2011 and an average gain over the previous 10 years of 5.2%.
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The number is closely in line with the 3 year trend. The media reports on the seasonally finagled numbers showing the “a 2 month decline yadda yadda,” are completely false and misleading. This is one of those times when the abstract impressionism of the seasonal picture painting process gives a completely false view. Sometimes seasonally adjusted numbers give a reasonable impression of the trend and sometimes they don’t. This is one of this times where the house of mirrors adjustment process breaks down.
Real retail sales ex gasoline rose by 6.8% in May, getting a boost from a drop in gas prices. This compares with a gain of 2.8% in May 2011 and an average gain for the past 10 years of 5.1%. So while the media and the clueless Wall Street whoredog shills are complaining about how bad the numbers were, they were actually quite positive and completely consistent with the growth pattern of the past 3 years. April was a weak month. May rebounded strongly from that.
If you are looking for signs of an economic slowdown, you won’t find them in these numbers.
That being said, in the big picture, this recovery is poor. Unlike nominal retail sales, retail sales ex gas remain below 2003 to 2007 levels. This difference is even more striking considering that US population has grown by 10% over that time. That means that real retail sales per capita have been falling for 9 years, a fact which no one in the Wall Street media mob ever mentions. They are too busy worrying about the top line, headline numbers, which are typically reported out of context. At best they don’t give the full picture and at worst, they’re just completely misleading, like this month.
The mob is only concerned with how much sales increased this month. They’re really looking at inflation, driven by the spending of the top 10%, not growth in the volume of sales, and not broader growth in real demand. The majority are buying less, not more. The idea of the “resilient US consumer” is a complete myth. Only the 10% is resilient. The other 90% is losing ground. That does not change the fact that the growth in May was solid and in line with the 3 year trend since the 2009 lows. The media reports of disappointing sales in May are just dead wrong.
The fact that retail sales are still trending up at a relatively constant pace of 4-5% per year suggests that stocks will get a reprieve from any major bear action for the time being. By the same token, it’s likely to mean bad news for the historically overbought Treasury market.
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